Despite high inflation, supply chain disruptions and a resurgence in COVID-19 cases, retail spending surged on Black Friday this year, especially for department stores. According to Steve Sadove, on November 26, 2021, total retail sales were up nearly 30% year over year, with apparel and department store sales leading the way. Holiday sales grew at their fastest pace in 17 years.
The S&P 500 also hit a record high recently as strong retail sales eased concerns. Additionally, with online sales reaching new highs, the industry is expected to continue its bull run. According to a publication by First Research, global department store sales are expected to grow at a CAGR of 4% through 2030.
So we think it might make sense to bet on fundamentally strong department store stocks like Macy’s, Inc. (M), Kohl’s Corporation (KSS) and Dillard’s, Inc. (DDS).
Click here to view our Retail Industry Report
Macy’s, Inc. (M)
One of the nation’s leading omnichannel fashion retailers, M’s brand portfolio includes Macy’s, Bloomingdale’s and Bluemercury. The Cincinnati, Ohio-based company has approximately 726 retail stores and operates through its websites and mobile apps.
On November 18, Jeff Gennette, Chairman and CEO of M, said, “Going into the fourth quarter, we remain a strong place for holiday shopping, and our strong omnichannel ecosystem is showing resilience in the face of the challenges of labor and supply chain and allows us to meet customer purchasing needs with speed and convenience. »
For the third fiscal quarter ended October 30, 2021, M’s net sales increased 36.3% year-over-year to $5.44 billion. Its net profit was $239 million, compared to a loss of $91 million the previous year. Additionally, EPS was $0.76, compared to a loss of $0.29 per share in the prior period, and its gross margin was 41%, compared to 35.6% in the previous period.
M’s revenue is expected to be $24.22 billion in fiscal 2022, representing a 39.6% year-over-year increase. The company’s EPS is expected to rise 319.5% year-over-year to $4.85 for the current year. Additionally, it has exceeded street EPS estimates in each of the past four quarters. Over the past year, the stock price has gained 123.4% to close yesterday’s trading session at $26.05.
It’s no surprise that M has an overall rating of B, which equates to a buy in our proprietary rating system. POWR ratings rate stocks on 118 separate factors, each with its own weighting. Additionally, it has an A rating for growth and value and a B rating for quality.
M is ranked #15 out of 63 A-rated fashion and luxury industry stocks. Click here to see additional POWR ratings for M (momentum, stability and sentiment).
Kohls Corporation (KSS)
A leading omnichannel retailer, KSS, based in Menomonee Falls, Wisconsin, offers a variety of products including brand name apparel, footwear and accessories through its stores and website. It has come a long way from opening its first department store in Brookfield, Wisconsin in 1962 to currently operating more than 1,100 stores in 49 states.
On November 18, 2021, Michelle Gass, CEO of KSS, said, “Our strategic efforts to transform Kohl’s into the premier destination for the active, casual lifestyle continue to gain momentum. We delivered another quarter of record earnings with sales and margins beating expectations. During the quarter, we accelerated Active’s growth and successfully launched several new brand partnerships, including the initial rollout of 200 Sephora in Kohl’s stores, which are off to a strong start.
KSS’s total revenue increased 15.6% year-over-year to $4.60 billion in the third quarter, which ended October 30, 2021. Its non-compliant net profit to GAAP was $243 million, up 12,050% year-over-year, and its Non-GAAP EPS increased 16,400% year-over-year for reach $1.65.
Analysts expect KSS revenue and EPS to grow 25.4% and 409.3%, respectively, year-over-year to $18.85 billion and $7.30 billion. dollars for the current year. Additionally, it has exceeded consensus EPS estimates in each of the past four quarters. Over the past year, the stock price has gained 22.6% to close yesterday’s trading session at $49.20.
KSS’s strong fundamentals are reflected in its POWR ratings. The stock has an overall rating of B, indicating a buy in our proprietary rating system.
KSS has an A rating for value and a B rating for quality. Within the Fashion & Luxury industry, it is ranked #22. Click here to view additional POWR ratings for Growth, Momentum, Sentiment and Stability for KSS.
Note that KSS is one of the few hand-picked stocks currently in the Reitmeister Total Return portfolio. Learn more here.
Dillard’s, Inc. (DDS)
The established retail company DDS operates in 250 locations and 32 clearance centers in 29 states and has its online store. The Little Rock, Ark.-based company. operates through two segments: retail operations and construction.
On September 28, 2021, DDS announced the launch of Nicola Bathie for Antonio Melani, the company’s latest limited-edition capsule collection launched under the exclusive Antonio Melani brand. Nicola Bathie McLaughlin said: “It was an absolute honor to step into the world of fashion with a famous brand like Antonio Melani.”
DDS’ net sales increased 44.5% year-over-year to $1.48 billion for its fiscal third quarter, ended October 30, 2021. Its net income was 197, $30 million, up 518.5% year over year. Additionally, its EPS rose 586% year-over-year to $9.81.
For its fiscal 2022, DDS revenue and EPS are expected to grow 47% and 1,489.6% year-over-year, respectively, to $6.52 billion and $38.63. Additionally, it has exceeded consensus EPS estimates in each of the past four quarters. Over the past year, the stock price has gained 306.1% to close yesterday’s trading session at $251.84.
DDS’ strong fundamentals are reflected in its POWR ratings. The stock has an overall B rating, which equates to a buy in our proprietary rating system.
Plus, it has an A rating for growth, value, and quality. DDS is ranked #16 in the fashion and luxury industry. Click here to see DDS ratings for Stability, Momentum and Sentiment.
Click here to view our Retail Industry Report
M shares fell $0.04 (-0.15%) in premarket trading on Wednesday. Year-to-date, M has gained 134.54%, versus a 29.14% rise in the benchmark S&P 500 over the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master’s degree in economics, she helps investors make informed investment decisions with her insightful commentary. Following…